DOCSLIB.ORG

Regulation Misled by Misread Theory

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Regulation Misled by Misread Theory Regulation Misled by Misread Theory Regulation Misled by Misread Theory Perfect Competition and Competition­ Imposed Price Discrimination William J. Baumol AEI-Brookings Joint Center 2005 Distinguished Lecture Presented at the American Enterprise Institute September 22, 2005 AEI-Brookings Joint Center for Regulatory Studies WASHINGTON, D.C. Distributed to the Trade by National Book Network, IS200 NBN Way, Blue Ridge Summit, PA 17214. To order call toll free 1-800-462-6420 or 1-717­ 794-3800. For all other inquiries please contact the AEI Press, llSO Seventeenth Street, N.W, Washington, D.C 20036 or call1-800-862-S801. Library of Congress Cataloging-in-Publication Data Baumol, William j. Regulation misled by misread theory: perfect competition and competition-imposed price discrimination / William j. Baumol. p. cm. Includes bibliographical references. ISBN-l3: 978-0-8447-1390-8 ISBN-IO: 0-8447-1390-2 1. Price discrimination. 2. Competition. 3. Antitrust law. 1. Title. HFS41 7. B38 2006 338.6'048-dc22 2006003184 10 09 08 07 06 I 2 3 4 S © 2006 by AEI-Brookings joint Center for Regulatory Studies, the American Enterprise Institute for Public Policy Research, Washington, D.C., and the Brookings Institution, Washington, D.C All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from the AEI-Brookingsjoint Center except in the case of brief quotations embodied in news articles, critical articles, or reviews. The AEI Press Publisher for the American Enterprise Institute llSO 17th Street, N.W Washington, D.C 20036 Printed in the United States of America Foreword he 2005 AEI-Brookings Joint Center Distinguished Lecture Award was given to Professor Baumol. The purpose of this Taward is to recognize a person who has made major contri­ butions to the field of regulation and related areas. Senior members of the Joint Center select the distinguished lecturer on the basis of his or her scholarly and practical contributions to the field. The lec­ turer is given complete latitude in choosing a topic for the lecture. Professor Baumol is a true Renaissance man. In addition to making seminal contributions to several fields in economics, he is an accomplished painter and sculptor. The hallmark of Professor Baumols work is the construction of elegant theory and then exploration of its practical implications. He has made seminal contributions in a number of important areas, including innovation, economic growth, entrepreneurship, welfare economics, and productivity. He even has a disease named after him-Baumols "cost disease"-which suggests why costs and prices go up relatively rapidly in professions like the performing arts. In selecting Professor Baumol for this award, the Joint Center highlighted his contributions to the field of industrial organization. One such contribution was to help develop a new theory of "contestable" markets, which recognized that monopoly providers only need the threat of competition to induce them not to exploit their position; a second was to help develop rules that are useful in designing socially efficient regulation, such as the inverse elas­ ticity rule and the efficient component pricing rule; and a third was to help provide a unifying framework for the growing field of environmental economics. v vi «» REGULATION MISLED BY MISREAD THEORY In this monograph, Professor Baumol shows how regulators can be misled by oversimplified economic theory. He focuses specifically on the issue of price discrimination and shows that competitive markets need not result in a Single price, contrary to what most of us learned in Economics 101. Professor Baumol then demonstrates a stronger result: Where competitive pressures prevail, they can force all firms to adopt discriminatory prices if consumer arbitrage is difficult. This radically different picture of competitive markets helps explain the near ubiquity of discrimi­ natory pricing in reality and suggests limits to the use of dis­ criminatory pricing as a justification for regulatory intervention. Like all Joint Center publications, this monograph can be freely downloaded at www.aei-brookings.org. We encourage edu­ cators to use and distribute these materials to their students. ROBERT W HAHN Executive Director AEI-Brookings Joint Center for Regulatory Studies ROBERT E. LITAN Director AEI-Brookings Joint Center for Regulatory Studies Acknowledgments am grateful to Daniel Swanson, Janusz Ordover, and an anonymous reviewer for helpful comments and to New l York University's C.V Starr Center for Applied Economics for its support. The idea for this article was suggested by the illuminating paper by Michael Levine (2002), in which he shows that dis­ criminatory pricing can occur in highly competitive markets. This paper takes the next step and seeks to demonstrate why, under competitive conditions, the firm will normally be forced to adopt discriminatory pricing wherever that is feasible. I must also express my deep gratitude to the Ewing Marion Kauffman Foundation for its generous support of the research underlying this paper; to Robert Litan, a partner in crime, who arranged for its presentation and publication; to Robert Hahn for his valuable comments; to Richard P O'Neill of the Federal Energy Regulatory Commission, whose perspicacity led him to ask about the Ramsey optimality of my result at the presentation of this paper at an AEI-Brookings meeting; to Elizabeth Bailey, who, as many times before, saw and pointed out to me the deeper implications of my discussion; to Sue Anne Batey Blackman, who eliminated all barbarity of expression from my earlier drafts; and to Sasha Gentling, who made all the required arrangements with extreme competence and grace. vii Regulation Misled by Misread Theory William J. Baumol Casual observation suggests that price discrimination is common in many industries that appear to be extremely competitive. ... [Fjirms in the airline, car rental, moving, hotel and restaurant businesses practice common types of price discrimination, and much evidence suggests that high-valuation consumers pay higher average prices than low-valuation consumers. Yet these markets are not charac­ terized by unusually high entry costs, economies of scale, product differentiation, or market concentration. --Dana, 1998, p. 395 conomists have generally been careful to point out that per­ fect competition is an artificial concept, albeit a useful and Epowerful analytic device. But the optimality properties long associated with this market form-and finally analyzed rigorously by Arrow (1951) and Debreu (l959)--have tempted some who are not as careful as they should be to invite regulators and antitrust authorities to use perfect competition theory for guidance in their rulings, as a way to promote the public interest. For example, only this year I heard a conference presentation dealing with the eco­ nomic and legal principles of copyright suggest that the innovating Schumpeterian entrepreneurs are automatically to be deemed proper subjects for antitrust attention because in the period before imitators enter the market, they can charge prices that exceed the marginal-cost levels of perfect competition. Never mind that this is 1 2 fi» REGULATION MISLED BY MISREAD THEORY a prescription for undennining intertemporal efficiency Never mind that marginal-cost pricing would generally preclude recoupment of the research and development (R&D) costs of the innovations at issue, costs that will have to be incurred many times again if inno­ vation is to continue. And never mind that a world of perfect com­ petition requires constant returns to scale and finns so small that they would never attract the attention of regulators or antitrust per­ sonnel. Because perfect competition has been shown in certain circumstances to yield efficient results, it is proposed that the regu­ lated finn be constrained to act accordingly I have witnessed a multipliCity of regulatory proceedings in which this was at least implicit in the positions taken by some parties to the litigation. Lest this situation be considered a failing of the poorly educated and, consequently, an infrequent misunderstanding, this paper deals with an issue about which misunderstanding is evidently not so rare-the case of the finn that adopts discriminatory prices. The usually accompanying argument notes that to merit regulatory or antitrust attention, it is frequently required that the target finn be shown to possess monopoly power. But because discriminatory pricing is incompatible with perfect competition, a finn whose prices are discriminatory is, from this fact alone, said to be shown to possess monopoly power. The purpose of this paper is to show that this ain't necessarily so and that, on the contrary, in a wide variety of instances closer to those that can attract regulatory attention, it is the very presence of effective competition that forces discriminatory prices upon the finn. Specifically, this paper offers a result on the theory of price under competitive conditions that seems not to be widely recog­ nized in the literature and which appears to be directly in conflict with common preconceptions. In brief, this proposition asserts that in a broad range of market types and conditions, where consumers can be separated into distinct groups with different demand elastic­ ities and in which the market's commodity cannot easily be resold by one group to another, market pressures will prevent any equilib­ rium in which the product price is unifonn. Not only will each WILLIAM J. BAUMOL ~ 3 firm be forced to adopt discriminatory prices, but each firm is likely to be forced to adopt a unique vector of prices, each of which is dic­ tated by the market. Thus, this paper seeks to show why price discrimination may occur-and may occur frequently-not despite relative ease of entry (or other competitive pressures) but because of it. In fact, I will show that in highly competitive markets, firms may have no choice: Competition can force them to adopt the vector of profit­ maximizing discriminatory prices.
Load more

Recommended publications
  • How the Rational Expectations Revolution Has Enriched
    How the Rational Expectations Revolution Has Changed Macroeconomic Policy Research by John B. Taylor STANFORD UNIVERSITY Revised Draft: February 29, 2000 Written versions of lecture presented at the 12th World Congress of the International Economic Association, Buenos Aires, Argentina, August 24, 1999. I am grateful to Jacques Dreze for helpful comments on an earlier draft. The rational expectations hypothesis is by far the most common expectations assumption used in macroeconomic research today. This hypothesis, which simply states that people's expectations are the same as the forecasts of the model being used to describe those people, was first put forth and used in models of competitive product markets by John Muth in the 1960s. But it was not until the early 1970s that Robert Lucas (1972, 1976) incorporated the rational expectations assumption into macroeconomics and showed how to make it operational mathematically. The “rational expectations revolution” is now as old as the Keynesian revolution was when Robert Lucas first brought rational expectations to macroeconomics. This rational expectations revolution has led to many different schools of macroeconomic research. The new classical economics school, the real business cycle school, the new Keynesian economics school, the new political macroeconomics school, and more recently the new neoclassical synthesis (Goodfriend and King (1997)) can all be traced to the introduction of rational expectations into macroeconomics in the early 1970s (see the discussion by Snowden and Vane (1999), pp. 30-50). In this lecture, which is part of the theme on "The Current State of Macroeconomics" at the 12th World Congress of the International Economic Association, I address a question that I am frequently asked by students and by "non-macroeconomist" colleagues, and that I suspect may be on many people's minds.
    [Show full text]
  • CURRICULUM VITAE August, 2015
    CURRICULUM VITAE August, 2015 Robert James Shiller Current Position Sterling Professor of Economics Yale University Cowles Foundation for Research in Economics P.O. Box 208281 New Haven, Connecticut 06520-8281 Delivery Address Cowles Foundation for Research in Economics 30 Hillhouse Avenue, Room 11a New Haven, CT 06520 Home Address 201 Everit Street New Haven, CT 06511 Telephone 203-432-3708 Office 203-432-6167 Fax 203-787-2182 Home [email protected] E-mail http://www.econ.yale.edu/~shiller Home Page Date of Birth March 29, 1946, Detroit, Michigan Marital Status Married, two grown children Education 1967 B.A. University of Michigan 1968 S.M. Massachusetts Institute of Technology 1972 Ph.D. Massachusetts Institute of Technology Employment Sterling Professor of Economics, Yale University, 2013- Arthur M. Okun Professor of Economics, Yale University 2008-13 Stanley B. Resor Professor of Economics Yale University 1989-2008 Professor of Economics, Yale University, 1982-, with joint appointment with Yale School of Management 2006-, Professor Adjunct of Law in semesters starting 2006 Visiting Professor, Department of Economics, Massachusetts Institute of Technology, 1981-82. Professor of Economics, University of Pennsylvania, and Professor of Finance, The Wharton School, 1981-82. Visitor, National Bureau of Economic Research, Cambridge, Massachusetts, and Visiting Scholar, Department of Economics, Harvard University, 1980-81. Associate Professor, Department of Economics, University of Pennsylvania, 1974-81. 1 Research Fellow, National Bureau of Economic Research, Research Center for Economics and Management Science, Cambridge; and Visiting Scholar, Department of Economics, Massachusetts Institute of Technology, 1974-75. Assistant Professor, Department of Economics, University of Minnesota, 1972-74.
    [Show full text]
  • Alan Stuart Blinder February 2020
    CURRICULUM VITAE Alan Stuart Blinder February 2020 Address Department of Economics and Woodrow Wilson School of Public & International Affairs 284 Julis Romo Rabinowitz Building Princeton University Princeton, NJ 08544-1021 Phone: 609-258-3358 FAX: 609-258-5398 E-mail: blinder (at) princeton (dot) edu Website : www.princeton.edu/blinder Personal Data Born: October 14, 1945, Brooklyn, New York. Marital Status: married (Madeline Blinder); two sons and four grandchildren Educational Background Ph.D., Massachusetts Institute of Technology, l97l M.Sc. (Econ.), London School of Economics, 1968 A.B., Princeton University, summa cum laude in economics, 1967. Doctor of Humane Letters (honoris causa), Bard College, 2010 Government Service Vice Chairman, Board of Governors of the Federal Reserve System, 1994-1996. Member, President's Council of Economic Advisers, 1993-1994. Deputy Assistant Director, Congressional Budget Office, 1975. Member, New Jersey Pension Review Committee, 2002-2003. Member, Panel of Economic Advisers, Congressional Budget Office, 2002-2005. Honors Bartels World Affairs Fellow, Cornell University, 2016. Selected as one of 55 “Global Thought Leaders” by the Carnegie Council, 2014. (See http://www.carnegiecouncil.org/studio/thought-leaders/index) Distinguished Fellow, American Economic Association, 2011-. Member, American Philosophical Society, 1996-. Audit Committee, 2003- Fellow, American Academy of Arts and Sciences, 1991-. John Kenneth Galbraith Fellow, American Academy of Political and Social Science, 2009-. William F. Butler Award, New York Association for Business Economics, 2013. 1 Adam Smith Award, National Association for Business Economics, 1999. Visionary Award, Council for Economic Education, 2013. Fellow, National Association for Business Economics, 2005-. Honorary Fellow, Foreign Policy Association, 2000-. Fellow, Econometric Society, 1981-.
    [Show full text]
  • Gomory, Baumol, and Samuelson on Comparative Advantage
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Palley, Thomas I. Research Report Rethinking trade and trade policy: Gomory, Baumol, and Samuelson on comparative advantage Public Policy Brief, No. 86 Provided in Cooperation with: Levy Economics Institute of Bard College Suggested Citation: Palley, Thomas I. (2006) : Rethinking trade and trade policy: Gomory, Baumol, and Samuelson on comparative advantage, Public Policy Brief, No. 86, ISBN 1931493561, Levy Economics Institute of Bard College, Annandale-on-Hudson, NY This Version is available at: http://hdl.handle.net/10419/54319 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu The Levy Economics Institute of Bard College Public Policy Brief No. 86, 2006 RETHINKING TRADE AND TRADE POLICY Gomory, Baumol, and Samuelson on Comparative Advantage thomas i.
    [Show full text]
  • WILLIAM J. BAUMOL Curriculum Vitae January 2012
    WILLIAM J. BAUMOL Curriculum Vitae January 2012 Born February 26, 1922, New York, NY Married, two children BSS College of the City of New York, 1942 Ph.D. University of London, 1949 1942-1943, 1946: Junior Economist, U.S. Department of Agriculture 1947-1949: Assistant Lecturer, London School of Economics 1949-1992: Professor of Economics, Princeton University 1983-2000: Director, C.V. Starr Center for Applied Economics, New York University Current joint appointments: Since 1992: Senior Economist; and the Joseph Douglas Green, 1895, Professor of Economics Emeritus, Princeton University Since 1971: Professor of Economics, New York University Since 2005: The Harold Price Professor of Entrepreneurship, Stern School of Business, New York University and Academic Director, Berkley Center for Entrepreneurship & Innovation, Stern School of Business, New York University Postal Address: Berkley Center for Entrepreneurship & Innovation, Stern School of Business, 44 West Fourth Street, KMC 7-98, New York University, New York, NY 10012-1126. E-mail: William Baumol: [email protected]; Janeece Lewis (Asst.): [email protected], Anne Noyes Saini (Ed.): [email protected] Homepage: http://pages.stern.nyu.edu/~wbaumol AWARDS & HONORS: 1953 Fellow, Econometric Society 1965 Honorary LL.D, Rider College (Trustee, 1960-1970) 1968 Joseph Douglas Green 1895 Professorship of Economics, Princeton University 1970 Honorary Fellow, London School of Economics, England 1971 Elected Member, American Academy of Arts and Sciences 1971 Honorary Doctorate, Stockholm School of Economics, Sweden 1973 Honorary Doctor of Humane Letters, Knox College 1973 Honorary Doctorate, University of Basel, Switzerland 1975 John R. Commons Award, Omicron Delta Epsilon 1975 Townsend Harris Medal, Alumni Assoc.
    [Show full text]
  • Economics Doctoral Programs Still Elide Entrepreneurship
    Discuss this article at Journaltalk: http://journaltalk.net/articles/5943 ECON JOURNAL WATCH 14(2) May 2017: 196–217 Economics Doctoral Programs Still Elide Entrepreneurship Dan Johansson1 and Arvid Malm2 LINK TO ABSTRACT The theoretical firm is entrepreneurless—the prince of Denmark has been expunged from the discussion of Hamlet. —William Baumol, “Entrepreneurship in Economic Theory” (1968) Many academics and policymakers regard entrepreneurship as a vital topic, often considering it a driving force behind job creation and economic growth. But thinking about entrepreneurship mostly takes place outside of mainstream economics. In his article “The Place of Entrepreneurship in ‘The Economics That Might Have Been,’” Sidney Winter (2016) aptly defines mainstream economics as the “unflinching application of the combined postulates of maximizing behavior, stable preferences, and market equilibrium.” Theories of economic change that define the entrepreneur, such as those proposed by Joseph Schumpeter, Frank Knight, Israel Kirzner, or Deirdre McCloskey and Arjo Klamer have not found a receptive audience in that dominant strand of economics. The entrepreneur represents interpretive asymmetry, variation, and novelty. A richer body of eco- nomic theory could explore the factors that make for interpretive creativity and its consequences, such as market innovation and economic growth. But the entrepre- neurial element is difficult to formalize mathematically and was thus pushed out of view as such formalization became increasingly dominant from the 1930s onwards (Baumol 1968; 2006; Blaug 1986; Barreto 1989; Hébert and Link 1989; 2007; 1. Örebro University School of Business, 701 82 Örebro, Sweden; HUI Research, 103 29 Stockholm, Sweden. We are grateful for the comments of participants at seminars at Aston University, HFI Research, the 86th annual meeting of the Southern Economic Association, and Örebro University, and those of Magnus Henrekson, Johan Karlsson, Inna Kozlinska, Mikael Stenkula, and two anonymous referees.
    [Show full text]
  • Liquidity Preference Theory: a Comparison of William Baumol's
    AFRREV, 8 (4), S/NO 35, SEPTEMBER, 2014 143 An International Multidisciplinary Journal, Ethiopia Vol. 8(4), Serial No. 35, September, 2014:143-152 ISSN 1994-9057 (Print) ISSN 2070--0083 (Online) DOI: http://dx.doi.org/10.4314/afrrev.v8i4.12 Liquidity Preference Theory: A Comparison of William Baumol’s and James Tobin’s Propositions Ogiriki, Tonye Department of Finance /Accountancy Niger Delta University, Bayelsa State Phone No: +2348036674326 E-mail: [email protected] & Andabai, Priye. W. Department of Finance /Accountancy Niger Delta University, Bayelsa State Phone No: +2348037046538 E-mail: [email protected] Abstract The refinement of liquidity preference theory was formulated by Baumol and Tobin in 1958 and their propositions were based on Keynesian model economy that emphasized on investing in risky assets, instead of transaction balances. William Baumol considered transaction balances to meet the working capital needs of the investors while Tobin emphasized on investment balances that premised on liquidity preference theory that seeks to explain the level of interest rate with regards to the interaction of money supply and desire of savers to hold their savings in cash or near cash. Therefore, the study attempts to compare and contrast liquidity preference heo o Willia Bau ol a Ja es To i ’s p oposi io s. The s u eco e s Copyright © IAARR, 2014: www.afrrevjo.net Indexed AJOL: www.ajol.info AFRREV, 8 (4), S/NO 35, SEPTEMBER, 2014 144 that since both of them are concerned about money, however what need to explain is not only the existence of demand for cash hence its yield is less than the yield on alternative assets but an inverse relationship between aggregate demand for cash and the level of different in yields.
    [Show full text]
  • Entrepreneurship and Growth a Latin American Paradox?
    Entrepreneurship and Growth A Latin American Paradox? F CRISTIA´ N LARROULET AND JUAN PABLO COUYOUMDJIAN n recent Latin American history, economists have advanced many different recipes to promote the region’s economic growth. Given these differences of I professional opinion and the region’s on-again, off-again development, popu- lism and political instability have been frequent responses to economic setbacks in many countries. That economic growth continues to be discussed as a mystery seems, in any case, surprising to us. A convincing argument can be made that economic growth is intimately related to the development of productive entrepreneurial activities in the context of an appropriate institutional setup. Historical evidence shows that the great improvements in standards of living achieved during the past two centuries have been associated with the development of personal resourcefulness and ingenuity under a system of private-property rights and contractual liberty (Landes 1999; Baumol 2002). To be sure, entrepreneurship may take various forms, and certain forms are antithetical to economic growth, so we must bear this fact in mind as we develop our arguments here. In this article, we examine the evolution of entrepreneurship in Latin America as presented in the Global Entrepreneurship Monitor (GEM) studies. These studies Cristia´n Larroulet is a member of the Facultad de Economı´a y Negocios, and Juan Pablo Couyoumdjian is a member of the Facultad de Economı´a y Negocios and the Facultad de Gobierno, both at the Universidad del Desarrollo in Santiago, Chile. The Independent Review, v. 14, n. 1, Summer 2009, ISSN 1086–1653, Copyright © 2009, pp.
    [Show full text]
  • Mark Blaug on the Historiography of Economics
    Erasmus Journal for Philosophy and Economics, Volume 6, Issue 3 (Special Issue), Winter 2013, pp. 44-63. http://ejpe.org/pdf/6-3-art-3.pdf Mark Blaug on the historiography of economics JOHN B. DAVIS Marquette University University of Amsterdam Abstract: This paper discusses how Mark Blaug reversed his thinking about the historiography of economics, abandoning ‘rational’ for ‘historical’ reconstruction, and using an economics of scientific knowledge argument against Paul Samuelson and others that rational reconstructions of past ideas and theories in the “marketplace of ideas” were Pareto inefficient. Blaug’s positive argument for historical reconstruction was built on the concept of “lost content” and his rejection of the end-state view of competition in favor of a process view. He used these ideas to emphasize path dependency in the development of economic thinking, thereby advancing an evolutionary view of economics that has connections to a Lakatosian understanding of economic methodology. The paper argues that Blaug was essentially successful in criticizing the standard rational reconstructionist view of the history of economic thought in economics, and that this is borne out by the nature of the change in recent economics. Keywords: Blaug, historiography, Samuelson, economics of scientific knowledge, process-conception of competition, path-dependency, evolutionary view JEL Classification: A14, B20, B31, B41, Z13 In the face of ideas, many economists are simply philistines, like troglodytes listening to a Beethoven quartet and asking why the four players seem to be unable to bow in unison (Blaug 1994, 18). Mark Blaug was a highly accomplished and influential historian of economic thought and economic methodologist who re-thought his AUTHOR ’S NOTE : Thanks for comments without implication on a previous version of this article go to Marcel Boumans, Tony Brewer, Bruce Caldwell, Zohreh Emami, D.
    [Show full text]
  • The Correspondence Between Baumol and Galbraith (1957–1958) an Unsuspected Source of Managerial Theories of the Firm
    The correspondence between Baumol and Galbraith (1957–1958) An unsuspected source of managerial theories of the firm. Alexandre Chirat To cite this version: Alexandre Chirat. The correspondence between Baumol and Galbraith (1957–1958) An unsuspected source of managerial theories of the firm.. 2020. halshs-02981270 HAL Id: halshs-02981270 https://halshs.archives-ouvertes.fr/halshs-02981270 Preprint submitted on 27 Oct 2020 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. T he correspondence between Baumol and Galbraith (1957-1958) An unsuspected source of managerial theories of the firm Alexandre Chirat October 2020 Working paper No. 2020 – 07 30, avenue de l’Observatoire 25009 Besançon France http://crese.univ-fcomte.fr/ CRESE The views expressed are those of the authors and do not necessarily reflect those of CRESE. Alexandre Chirat First Draft (do not quote) 20 Octobre 2020 The correspondence between Baumol and Galbraith (1957–1958) An unsuspected source of managerial theories of the firm. Abstract: Baumol’s impact on the development of managerial theories of the firm is investigated here through material found in Galbraith’s archives. In 1957 Galbraith published a paper claiming that the impact of macroeconomic policies varies with market structures (competitive versus oligopolistic).
    [Show full text]
  • Tobin's Keynesianism
    1 TOBIN’S KEYNESIANISM Robert W. Dimand Department of Economics Brock University St. Catharines, Ontario L2S 3A1 Canada Telephone: 1-905-688-5550 ext 3125 Fax: 1-905-688-6388 E-mail: [email protected] To be presented at the conference on Keynes, Sophia University, Tokyo, March 2007. I am grateful for helpful comments from Avi Cohen, Omar Hamouda, J. Allan Hynes, David Laidler, Don Moggridge, and Allan Olley at the University of Toronto/York University workshop in the history of economic thought. Introduction In September 1936, when James Tobin was an eighteen year-old sophomore taking principles of economics (Ec A) at Harvard, his tutor Spencer Pollard (a graduate student who was also the instructor of Tobin‟s Ec A section) “decided that for tutorial he and I, mainly I, should read „this new book from England. They say it may be important.‟ So I plunged in, being too young and ignorant to know that I was too young and ignorant” to begin the study of economics by reading Keynes‟s General Theory of Employment, Interest and Money (Tobin 1988, 662). Pollard was right: the book did turn out to important, not least for its lasting role in shaping Tobin‟s intellectual development. Tobin (1992, 1993) remained proud to call himself an “Old Keynesian” in contrast to New Keynesian, New Classical, and Post Keynesian economics, and, when Harcourt and Riach (1997) edited A “Second Edition” of the General Theory it was fitting that they invited Tobin (1997) to contribute the overview chapter, with the first part of the chapter 2 written “as J.
    [Show full text]
  • William Baumol, See the Biographic Interview of Krueger (2001)
    1 A Conversation with Will Baumol on Capitalism, Innovation and Growth Antonio Guarino1 and Maurizio Iacopetta2 1. Introduction William J. Baumol has been one of the most influential economists in the last fifty years. Pioneering work in the theory of money, foremost research in the theory of competition, industrial organization and technological change, notable analyses in the theory of externalities and environment, influential research in the theory of productivity and growth are, perhaps, his best known contributions. In his most recent book, “The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism,” Baumol reconsiders his analysis of industrial organization and technological change and makes one point: “Whatever the deficiencies of the free-market, it is certainly very good at one thing: the manufacture of economic growth.” Baumol attributes the unprecedented and unparalleled growth performance of capitalist economies to their ability to create and diffuse innovations and apply them to different purposes. The entire book is devoted to explain this ability, to capture the different mechanisms that make capitalism such a unique innovation and growth machine. In other words, for Baumol is not static efficiency what makes a big difference between capitalism and communism or capitalism and medieval societies: the great disparity is in dynamic efficiency, i.e., in the pace of technological change useful for industrial purposes. In this view, the fact that many actual capitalist economies are far from the model of perfect competition, for instance because of oligopolistic power or technological externalities (spillovers), is not necessarily negative for welfare. On the contrary, Baumol shows that oligopolistic rivalry and spillovers have substantial positive effects on the rate of innovation and growth.
    [Show full text]